­Strong Parentage
Chhattisgarh East Railway Limited (CERL) was established in 2013 by SECL, IRCON and GoCG for developing the East Railway Corridor and enhancing the coal production of SECL. SECL, the parent of CERL, is the largest coal producer in India and is part of Coal India Ltd (CIL). The company has 65 mines spread over Chhattisgarh and Madhya Pradesh, including 46 underground and 19 opencast mines. Ircon (formerly Indian Railway Construction Company Limited), responsible for the implementation of the project, is an engineering and construction company specialized in transport infrastructure. The public sector undertaking was established in 1976, by the Government of India and is a wholly owned entity of the Ministry of Railways. Ircon has completed over 300 major infrastructure projects in India and over 100 major projects across the world in more than 21 countries. IRCON is responsible for construction of rail infrastructure in both the phases. The rating derives strength from the strong parentage of CERL, the significant experience of such promoters in project execution, their strong financial flexibility and also their sovereign ownership. Acuité believes that such promoter linkages and execution capabilities will offset the project risks to a considerable extent in CERL. Strategic importance of East Railway corridor to stakeholders CERL was incorporated with the specific purpose of setting up the East Rail Corridor. The project is strategically important for coal evacuation for SECL. The corridor will primarily carry originating traffic from the mines in the Mand Raigarh coalfields. The proposed rail infrastructure will help the coal movement and increase coal production in the region.

Project (Phase I) in an advanced stage
The phase I project started from April 2014 and since inception, it has been accorded very high priority and its progress is being closely monitored by the Ministry of Coal ( MOC) and Ministry of Railway (MOR). It is a strategic project which will provide key rail infrastructure for enabling coal movement and hence increase in coal production in the region and alleviate the coal shortage in the country. The total cost erstwhile was Rs. 3055.15 Cr. which has been revised to Rs. 3407.09 Cr. considering the rerouting and the time overruns. The project is significantly completed as reflected from 93.78 percent of physical progress till 31st March 2024.   The movement of goods train has commenced since October 2019. The company has registered revenue of Rs 51.21 crore in FY24 as against Rs 62.23 Cr. in FY23. The project is expected to be completed by June 2025.  Acuité believes the company will continue to improve its operation over the medium term as CERL has already started generating cash flow. The timely completion of phase II project will help the company to further augment their business risk profile.
 

­Time and cost overrun
There has been a time overrun is due to the re-routing and realignment of railways line to the extent it was falling within the boundaries of coal blocks awarded to Maharashtra State Power Generation Co. Limited (MAHAGENCO) and Chhattisgarh State Power Generation Company (CSPGCL) on the envisaged route which in turn led to the cost overrun for the said projects.
The revised cost for the project completion as estimated is Rs. 3407.09 crore from earlier Rs.3055.15 Cr. The said cost is the net cost after deducting the reimbursement of the rerouting and Infructuous cost. The revised cost is expected to be funded at a debt: equity ratio of 80:20. The company is yet to complete the debt syndication process. The financial closure of the same would remain a key monitorable for the project going ahead. Further shortfalls and cashflow mismatches will be borne by the promoters. The construction for phase two is expected to begin in Q3 FY2025 and the ability of the company to complete the projected succesfully without any time and cost over runs will be a key rating sensitivity.